MODULE 2

ACCOUNTS
RECEIVABLE

ZEUS VERNON B. MILLAN

Trade vs. Non-trade receivables

Trade receivables are receivables arising from

the sale of goods or services in the ordinary
course of business.

Receivables arising from other sources are

non-trade receivables.
Financial statement presentation

Trade receivables are classified as current

assets when they are expected to be realized in
cash within the normal operating cycle or one
year, whichever is longer.
Non-trade receivables are classified as current
assets only when they are expected to be
realized in cash within one year.

Trade and non-trade receivables that are

current assets are aggregated and presented in
the statement of financial position as “Trade
and other receivables.”
Initial Measurement

Trade receivables that do not have a significant

financing component are measured at the
transaction price in accordance with PFRS 15
Revenue from Contracts with Customers.
Transaction price is “the amount of consideration
to which an entity expects to be entitled in
exchange for transferring promised goods or
services to a customer, excluding amounts
collected on behalf of third parties (e.g., some
sales taxes).” (PFRS 15)
As a practical expedient under PFRS 15, an
entity may not discount a trade receivable if it is
due within 1 year.
Recognition

Trade receivable is recognized when the entity

has right to consideration that is unconditional.
This is normally the case when the control over
the promised goods or services is transferred to
the customer.
FOB Shipping point vs. FOB Destination

Under FOB shipping point, ownership is

transferred to the buyer upon shipment.
Therefore, sales and accounts receivable are
recognized on shipment date.
Under FOB destination, ownership is
transferred only upon receipt of the goods by
the buyer. Therefore, sales and accounts
receivable are recognized only when the buyer
receives delivery of the goods.
Accounting for sales discounts

Trade discount vs. Cash discount

Traditional GAAP vs. PFRS 15 treatment